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Coronavirus Tax Updates - Individuals

Updated: Mar 30, 2020

Tax filing and payment extension:

  • The extension to July 15 is automatic for both Federal and California tax returns and payments. It is not a uniform extension for all states, so be sure to check your state if you’re not a CA resident.

  • The extension covers all returns and tax payments typically due in April, including 2019 personal taxes, 2020 Q1 estimated taxes and CA business taxes (i.e. CA LLC payments)

  • If you’ve already filed your 2019 return and need to postpone your automatic tax payment, please call the US Treasury to request a cancellation: 888-353-4537

  • Payments made online can be cancelled by visiting IRS Direct Pay

  • The IRS has not issued guidance on Q2 estimated taxes (due 6/15). Please check the IRS coronavirus website for updates.

  • California has postponed Q2 payments to 7/15

  • The due date for property taxes in many counties, including LA County has not been extended. It sounds like they will be lenient with penalty waivers, but you will need to request a waiver if you’re unable to pay on time (due 4/10)

  • The new 7/15 deadline also applies to HSA and IRA contributions

The CARES Act was passed by Congress and signed by President Trump on March 27. The bill provides relief to several groups impacted by the coronavirus pandemic.

Cash payments to individuals:

  • The bill created a refundable tax credit for 2020 and the IRS is paying out the amount of that tax credit to eligible taxpayers now. Since the IRS does not have your 2020 tax year information, it will use a previous year’s information to calculate the amount (2019 if filed, 2018 if not).

  • Single adults with Social Security numbers who are United States residents and have an adjusted gross income (AGI) of $75,000 or less will receive $1,200. The payment is reduced by $5 for every $100 your AGI is over $75,000.

  • Married couples with no children with an AGI of $150,000 or less will receive a total of $2,400. The payment is reduced by $5 for every $100 your AGI is over $150,000.

  • Taxpayers filing as head of household with an AGI of $112,500 or less will receive $1,200. The payment is reduced by $5 for every $100 your AGI is over $112,500.

  • Your AGI is on line 8b of the 2019 Form 1040 and on line 7 of the 2018 Form 1040

  • Taxpayers with children will receive $500 for each eligible child (16 or younger)

  • The payment decreases until it stops altogether for single people earning $99,000 or married people who have no children and earn $198,000.

  • The phaseout is slightly higher if you have children. For example, a family with two children would no longer be eligible for any payments if its income surpassed $218,000.

  • You can’t get a payment if someone claims you as a dependent, even if you’re an adult.

  • In most instances, everyone must have a valid Social Security number in order to be eligible. There is an exception for members of the military.

  • This is a tax credit - it is not considered taxable income for 2020.

  • People on Social Security are eligible to receive the coronavirus relief payment as long as their total income does not exceed the limit. Low-income Americans on Social Security do not need to file a tax return. As long as they received an SSA-1099 form (the Social Security benefit statement), the federal government will be able to send them a payment via the usual way they get their Social Security payment. Retirees and people on disability are both eligible for the special payment.

  • Confused? Here’s a helpful stimulus check calculator

Unemployment Benefits:

  • Pandemic Unemployment Assistance covers people who are unable to work because of the coronavirus outbreak. This coverage extends to independent contractors, gig workers, sick people and those caring for a loved one during the outbreak.

  • If you are unemployed, partly unemployed or unable to work because your employer closed, you’re covered under the bill.

  • Benefit amounts will be calculated based on previous income, using a formula from the Disaster Unemployment Assistance program

  • State benefits will be supplemented with an extra Federal payment of $600 per week over the next four months (through 7/31) for those who are out of work and getting jobless benefits in their state.

  • Gig workers, contractors and others who wouldn't otherwise qualify for unemployment compensation but cannot work due to the coronavirus emergency will get the $600 federal weekly payment, plus half the average unemployment benefit in their state.

  • Part-time workers are eligible for benefits, but the benefit amount and how long benefits will last depend on each state. They are also eligible for the additional $600 weekly benefit.

  • The federal government will provide temporary full funding of the first week of regular unemployment for states with no waiting period and extend UI benefits for an additional 13 weeks through December 31, 2020 after state UI benefits end.

  • You will receive the extra $600 fed payment even if you were already getting unemployment before the outbreak

  • You are also eligible if you rely on a school, a day care or another facility to care for a child, elderly parent or another household member so that you can work — and that facility has been shut down because of coronavirus

  • You will also be covered if you were immediately laid off from a new job or could not start a new job and did not have a sufficient work history to qualify for benefits under normal circumstances.

  • Please note, unemployment benefits are taxable income

  • People who are employed and working from home are not eligible.

  • Expect longer than usual processing times due to the record number of claims (over 1M in CA)

  • Please visit the California EDD coronavirus site and the EDD FAQ site for more info

Distributions and loans from retirement accounts:

  • The 10% early distribution penalty will be waived for distributions up to $100K. It is still considered a taxable distribution, but you will have 3 years to either pay the tax or return the money into the account (i.e. a tax-free rollover).

  • The max 401k loan has been increased from the lesser of $50K or 50% of the account value to $100K or 100% of the account value.

  • RMD’s are not required for 2020.

  • If you don’t want your RMD this year, make sure to cancel automatic distributions you’ve set up.

  • If you've already received a distribution from your own IRA or one inherited from a spouse for 2020, you can roll it back into your IRA within 60 days of receipt.

  • Consider a Roth conversion. Typically, you must take RMDs out before you can do a Roth conversion.

Charitable Contributions:

  • Individual taxpayers who do not itemize can take a $300 above the line deduction for charitable contributions in 2020

  • The max charitable contribution deduction in 2020 has been increased from 60% of your AGI to 100%

  • Corporations are permitted to deduct qualified cash contributions made during 2020 up to 25% of their taxable income (increased from the current 10% of taxable income limitation)

Student Loans:

  • All federal student loan payments will be suspended through 9/30/20

  • Interest will not accrue

  • Nonpayment will not adversely affect your credit score or qualification for loan forgiveness

  • Wage and tax refund garnishment will be suspended for people who have defaulted on their federal student loans

  • This does not apply to private student loans

  • An employer can pay up to $5,250 in 2020 of an employee’s student loan obligation on a tax-free basis.

  • Previously, an employer could only help cover an employee’s qualified educational expenses.

  • This is now a combined limit; thus, an employer could pay $3,000 towards an employee’s Master’s degree and another $4,000 of the same employee’s student loan payments in 2020, but the maximum amount that will be tax-free to the employee is $5,250 (the excess in taxable compensation).

  • The employee cannot deduct the interest on the student loan to the extent of the tax-free employer assistance.

Mortgage payment assistance:

  • Wells Fargo, US Bank, Citi and JP Morgan Chase have all agreed to 90-day waiver of payments for those that have been impacted by COVID-19 in California.

  • Many credit unions and smaller banks also agreed to the 90-day waiver.

  • Bank of America agreed to waive payments one month at a time until the crisis is over, and will add them to the end of the loan term.

  • The agreement does not eliminate debt for California homeowners. Instead, it gives them a 90-day grace period in which to make each month’s payment.

  • Assistance is available to people who have gotten sick from the coronavirus and to people who have lost jobs or had hours cut because of efforts to curb the spread of the virus.

  • Contact your lender for more information.

Covered California:

Check out the list of source articles for more info

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